ISLAMABAD – The World Bank has projected Pakistan’s economic growth to stay at three per cent in fiscal year 2026. The bank said the lingering impacts of recent floods would continue to weigh on agriculture and industry. In its report, “Staying the Course for Growth and Jobs,” the WB noted that Pakistan’s economy expanded by three per cent in FY25, up from 2.6pc last year, but warned of slow recovery ahead.
Earlier this month, the WB had already trimmed its growth forecast for FY25 from 3.1pc to 2.6pc. It cited widespread flood damage as the main factor behind the downgrade, along with rising inflation and weak exports. The new report confirms that growth will likely remain flat through FY26 before gradually picking up as stability and reforms take hold. Pakistan, however, still targets a 4.2pc growth rate as part of its commitments with the IMF.
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The WB said fiscal tightening and strict monetary policy had helped control inflation and improve fiscal balances. Industrial and service sectors performed better as business confidence improved, but agriculture lagged behind due to severe weather, pest infestations, and flood destruction. It warned that the floods caused “significant human and economic losses,” disrupting cities, farmland, and livelihoods across major provinces.
World Bank Country Director for Pakistan, Bolormaa Amgaabazar, said maintaining reform momentum and creating jobs were vital for stability. She emphasized strengthening social protection and infrastructure to shield vulnerable communities from future climate shocks. For FY27, the WB projected modest growth of 3.4pc, assuming consistent reforms and macroeconomic discipline. However, it warned that global uncertainty and tight fiscal conditions would continue to constrain growth.
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The report also highlighted Pakistan’s weak export performance, noting that exports had dropped from 16pc of GDP in the 1990s to 10pc in 2024. It blamed high tariffs, costly energy, and poor logistics for the decline. The WB urged broader reforms, including a market-based exchange rate, better trade finance, and stronger digital infrastructure. It said such measures are essential for driving export-led growth and ensuring long-term economic resilience.